TBA Futures Contracts and Central Counterparty Clearing of TBA

ABSTRACT

Networks, systems and methods that match orders for TBA futures and settle and clear open positions for TBA futures are disclosed. The TBA futures may include MBS TBA future contracts. A central counterparty clearing firm may net long and short positions and generate delivery instructions to parties having open positions.

This application is a continuation of U.S. patent application Ser. No.13/729,892 filed Dec. 28, 2012, which is a continuation of U.S. patentapplication Ser. No. 11/865,176 filed Oct. 1, 2007. Both applicationsare incorporated herein by reference in their entireties.

BACKGROUND OF INVENTION

1. Field of the Invention

The present invention relates to systems and methods for managingtrading of investment vehicles, and particularly, to-be-announced (TBA)instruments.

2. Description of the Related Art

Mortgage backed securities (MBS) are bought and sold through differentmarket mechanisms. Some mechanisms include a pass-through MBS issued byor guaranteed by institutions such as Fannie Mae, Freddie Mac and GinnieMae. A pass-through security may be created when multiple mortgages arepooled together and sold as undivided interests. The mortgages generallyhave similar characteristics, such as loan type, maturity and interestrate. An originator, such as a lender, services the mortgage and passesthe principal and interest through, less a servicing fee, to a MBSissuer. The mortgages may be packaged by the issuer and sold toinvestors. The principal and interest, less guaranty and other fees arethus passed through to the investor. The investor receives a share ofthe resulting cash flows.

The pass-through securities, or MBS, may trade on a to-be-announced(TBA) market. A TBA contract is an underlying contract to buy or sell aMBS that is delivered at a predetermined future date. Under the TBAcontract, the seller promises to deliver MBS on the future settlementdate and a purchaser agrees to acquire a specified dollar amount of MBS.The contract is satisfied when the seller delivers the MBS pools atsettlement. Thus, a mortgage lender may use a TBA contract to lock in aninterest rate on loans it will fund before the loan is closed.

In a TBA market, MBS are traded on a forward or delayed delivery basiswith settlement up to 180 days later. The actual mortgage poolscomprising the MBS are not specified at the time of sale. In fact, manyof the mortgage loans may not even be signed (and the mortgage poolscreated) at the time of sale. The largest volume of trading in the TBAmarket is for settlement within 30 days.

The parties to a TBA trade may agree to the type of security, coupon,face value, price, and settlement date at the time of the trade. Duringa period of time before the settlement date, such as 48 hours beforesettlement, the seller specifies or allocates the identity and number ofmortgage pools to satisfy the TBA trade. Therefore, a mortgageoriginator may have until 48 hours before the settlement date to decidewhether to use new pools of mortgages or to buy outstanding MBS to coverthe trade.

In the TBA, trades may take place some time before the actual settlementof the transaction and underwater positions are subject to very highmargins of up to 130% which are administered by the clearer of the TBAmarket, the Mortgage Backed Security Clearing Corporation (MBSCC) whichis a subsidiary of the Fixed-Income Clearing Corporation (FICC). TheMBSCC is an organization that provides netting and pool notificationservices to the mortgage-backed securities market.

Each day the MBSCC gets the closing prices for each forward MBS anddetermines the mark to market for margining. For example, if a positionnetted out to show a loss of $1 million, a clearing firm would have topost $1.3 million. Initial/base margins are said to be $250,000 plus anadditional 32 basis points on your net position. If the net position ispositive, this may be credited to reduce 32 basis point minimum on thenet.

TBA markets that provide security and saving from cross-margining forthe trading parties are desired. Increases in trading efficiencies,pricing, execution, delivery and settlement of TBA contracts as well asthe underlying MBS may increase liquidity and provide security fortraders. Therefore, there is a need for systems and methods foradministering, settling, and clearing of traded TBA instruments.

BRIEF SUMMARY

By way of introduction, a system, apparatus, and/or method foradministering, settling, and clearing TBA instruments provides acentrally cleared, guaranteed, and settled market for exchange listedTBA futures. In an aspect of the invention, mark-to-market gains may bemonetized for the TBA instruments. Embodiments may be achieved by, amongothers, one or more devices, systems, networks, and/or processes foradministering, communicating, managing, placing, entering, receiving,matching, clearing, settling, listing and/or confirming orders for TBAFutures.

In an exemplary embodiment, the TBA futures include couponscorresponding to those offered in a TBA market for Class A MBS that areexchange-listed. The coupons may have a par value 100 basis points aboveand below a current market rate for the corresponding TBA contract. Forexample, if the Class A mortgage rate is offered at 6.00%, one listedrate for trading will be 5.00% and another will be 7.00%. Additional orless coupons may be added for market conditions. The coupons are tradedon an electronic trading system such as the Globex® electronic tradingsystem.

Pricing of the TBA Future is determined in multiples of one-quarter ofone thirty-second ( 1/32) per 100 point. ($78.125 rounded up to thenearest cent per contract). Intermonth spreads may have minimum pricefluctuations in multiples of one-eighth of one thirty-second point per100 points ($39.0625 per contract). Par is determined on the basis of100 points.

An expiring TBA future may be settled with a position in thecorresponding TBA contract (i.e., the Class A TBA market). For example,an expiring October 2006 CME 5.5% TBA future may be settled with aposition in the October 2006 5.5% Class A TBA market.

Trading may occur on the TBA futures until a predetermined time periodbefore the settlement date, during which trading may no longer occur. Inan embodiment, trading may cease on the TBA future on 5th business daybefore the settlement date for a Class A 30-year MBS as identified inthe schedule posted by the Mortgage Backed Securities ClearingCorporation division of the Fixed Income Clearing Corporation.

For example, if FICC has designated a particular day as the delivery dayfor Class A MBS TBAs, the last trading day for the corresponding TBAFutures would be five days prior to the designated date. After theexpiration time, the long and short positions may be netted andcounterparties for each open position identified. Each party having anopen position in the TBA future may receive delivery instructions. Thedelivery instructions indicate the party's position, the issuer of theMBS (e.g., FNMA, Freddie Mac), coupon, contract settlement price, andopposite firm or identified counterparty. The parties thus receivenotification of their delivery obligations. A delivery confirmation maybe sent to the central counterparty for the TBA Futures confirming thatthe TBA trades conforming to the delivery instructions have beenexecuted.

In an aspect of the invention, a method and system are provided forsettling TBA futures contracts. At a central counterparty, openpositions in a TBA future market may be determined prior to expirationof a TBA future. Outstanding long and short positions may be cleared andcounterparties identified for those positions that will be settledthrough delivery. The counterparties may be notified of open positionsto be settled through delivery.

The foregoing summary is provided only by way of introduction. Thefeatures and advantages of the TBA futures and systems foradministering, communicating, managing, placing, entering, receiving,matching, clearing, settling, presenting, listing and/or confirmingorders for TBA futures may be realized and obtained by theinstrumentalities and combinations pointed out in the claims. Nothing inthis section should be taken as a limitation on the claims, which definethe scope of the invention. Additional features and advantages will beset forth in the description that follows, and in part will be obviousfrom the description, or may be learned by practice of the presentinvention.

BRIEF DESCRIPTION OF THE DRAWINGS

Examples of the invention are described with reference to theaccompanying drawings, in which components, features and integral partsthat correspond to one another each have the same reference number,wherein:

FIG. 1 shows an exemplary system that may be used to implement aspectsof a TBA future in accordance with an aspect of the invention;

FIG. 2 shows an exemplary system that may be used to match orders for aTBA future in accordance with an aspect of the invention;

FIG. 3 shows a exemplary method that may be used to match orders for TBAfutures in accordance with an aspect of the invention; and

FIG. 4 shows an exemplary method for clearing and settling openpositions for TBA futures in accordance with an aspect of the invention.

DETAILED DESCRIPTION

The present invention may take physical form in certain parts and steps,embodiments of which will be described in detail in the followingdescription and illustrated in the accompanying drawings that form apart hereof.

In exemplary embodiments, systems, methods and apparatuses foradministering, communicating, managing, placing, entering, receiving,matching, clearing, settling, listing and/or confirming orders for TBAfutures may be achieved in many different forms, formats, and designs.Embodiments may take the form of one or more devices, systems,distributed networks, data processing systems, and/or processes andshould not be construed as limited to the exemplary embodiments setforth herein.

Embodiments also may take the form of electronic hardware, computersoftware, firmware, including object and/or source code, and/orcombinations thereof. Embodiments may be stored on computer-readablemedia installed on, deployed by, resident on, invoked by and/or used byone or more data processors, controllers, computers, clients, servers,gateways, networks of computers, and/or any combinations thereof. Thecomputers, servers, gateways, may have one or more controllersconfigured to execute instructions embodied as computer software.

An embodiment may include software stored and executed on an electronicdevice such as one or more traders terminals, connected to a matchserver having electronic components configured to carry out instructionsaccording to a computer program stored on a computer-readable storagemedium, such as a memory, hard disk, CD-ROM, optical storage device,magnetic storage device and/or combinations thereof to match orders forTBA futures. The electronic device may be a computing device having aprogrammable controller or processor. For example, the electronic devicemay be a personal computer, laptop or handheld computer, tablet PC andlike computing devices having a user interface. The electronic devicemay be a dedicated function device such as personal communicationsdevice, a portable or desktop telephone, a personal digital assistant(“PDA”), remote control device, personal digital media system andsimilar electronic devices. The match server may be communicativelycoupled with a one or more servers configured to clearing and settlementprocesses for exchange-listed TBA futures. The clearing house server maybe configured to provide central clearing and settlement processes forexchange listed TBA futures. The clearing house server may identify andreport margin requirements based on a trader's instantaneous position,including open positions for the trader in any TBA future.

Exemplary Operating Environment

Aspects of the present invention may be implemented with computerdevices and networks configured to allow users to exchange tradinginformation. An exemplary trading network environment for implementingtrading systems and methods is shown in FIG. 1.

An exchange computer system 100 receives orders and transmits marketdata related to orders, trades and related information. Exchangecomputer system 100 may be implemented with one or more mainframes,servers, gateways, controllers, desktops or other computers.

A user database 102 includes information identifying traders and otherusers of exchange computer system 100. Data may include user names andpasswords. An account data module 104 may process account informationthat may be used during trades.

A match engine module 106 is included to match bid and offer prices.Match engine module 106 may be implemented with software that executesone or more algorithms for matching bids and offers.

A trade database 108 may be included to store information identifyingtrades and descriptions of trades. In particular, a trade database maystore information identifying or associated with the time that a tradetook place and the contract price.

An order book module 110 may be included to compute or otherwisedetermine current bid and offer prices. A market data module 112 may beincluded to collect market data and prepare the data for transmission tousers. A risk management module 134 may be included to compute anddetermine a user's risk utilization in relation to the user's definedrisk thresholds. An order processing module 136 may be included todecompose delta based and bulk order types for processing by order bookmodule 110 and match engine module 106.

A clearing module 180 may be included to clear outstanding long andshort positions for MBS TBA futures on contract settlement day or anyother trading day. Furthermore, a post-trade processing module 182 mayalso be included to generate reports and enumerate details of theforward TBA trade which may fulfill delivery obligations.

The trading network environment shown in FIG. 1 includes computerdevices 114, 116, 118, 120 and 122. The computer devices 114, 116, 118,120 and 122 may include one or more central processors, or controllers,that control the overall operation of the computer. The computer devices114, 116, 118, 120 and 122 may include one or more system buses thatconnect the central processor to one or more components, such as anetwork card or modem. The computer devices 114, 116, 118, 120 and 122may also include interface units and drives for reading and writing dataor files. Depending on the type of computer device, a user can interactwith the computer with a keyboard, pointing device, microphone, pendevice or other input device.

Computer device 114 is shown communicatively connected to exchangecomputer system 100. Exchange computer system 100 and computer device114 may be connected via a T1 line, a common local area network (LAN) awireless communication device or any other mechanism for communicativelyconnecting computer devices. Computer device 114 is shown connected to aradio 132. The user of radio 132 may be a trader or exchange employee.The radio user may transmit orders or other information to a user ofcomputer device 114. The user of computer device 114 may then transmitthe trade or other information to exchange computer system 100.

Computer devices 116 and 118 are coupled to a local area network (“LAN”)124. LAN 124 may have one or more of the well-known LAN topologies andmay use a variety of different protocols, such as Ethernet. Computers116 and 118 may communicate with each other and other computers anddevices connected to LAN 124. Computers and other devices may beconnected to LAN 124 via twisted pair wires, coaxial cable, fiber opticsor other media. Alternatively, a wireless personal digital assistantdevice (PDA) 122 may communicate with LAN 124 or the Internet 126 viaradio waves. PDA 122 may also communicate with exchange computer system100 via a conventional wireless hub 128. As used herein, a PDA includesmobile telephones and other wireless devices that communicate with anetwork via radio waves.

FIG. 1 also shows LAN 124 connected to the Internet 126. LAN 124 mayinclude a router to connect LAN 124 to the Internet 126. Computer device120 is shown connected directly to the Internet 126. The connection maybe via a modem, DSL line, satellite dish or any other device forcommunicatively connecting a computer device to the Internet.

One or more market makers 130 may maintain a market by providingsubstantially constant bid and offer prices for a financial instrument,such as a derivative or security, to exchange computer system 100.Exchange computer system 100 may also exchange information with othertrade engines, such as trade engine 138. Numerous additional computersand systems may be coupled to exchange computer system 100. Suchcomputers and systems may include clearing, regulatory and fee systems.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored oncomputer-readable medium. For example, computer device 116 may includecomputer-executable instructions for receiving order information from auser and transmitting that order information to exchange computer system100. In another example, computer device 118 may includecomputer-executable instructions for receiving market data from exchangecomputer system 100 and displaying that information to a user.

Additional servers, computers, handheld devices, personal digitalassistants, telephones and other devices may also be connected toexchange computer system 100. Moreover, the topology shown in FIG. 1 ismerely an example and that the components shown in FIG. 1 may beconnected by numerous alternative topologies.

EXEMPLARY EMBODIMENTS

FIG. 2 shows an exemplary system that may be used to match orders and/ortrades for TBA futures. The coupons corresponding to the TBA futures maybe traded on an electronic trading system such as the Globex® electronictrading system. At least one benefit of an exchange traded derivative,as opposed to an OTC type, is that the derivative is cleared andguaranteed by a central counterparty clearing firm. This may providecapital efficiencies and minimized risk for traders of the exchangetraded derivative. In addition, margin requirements may be lowered forentities that utilize cross-margining across different derivative orinterest rate products.

In FIG. 2, a front end clearing application 202 receives trade data 204.Trade data 204 may include information that identifies an order for afutures contract. In an aspect of the invention, the futures contractmay be a TBA futures contract that includes information such as couponrate corresponding to those offered in a TBA market for a Class A MBS.The coupons may have a par value 100 basis points above and below acurrent market rate for the corresponding TBA contract. For example, ifthe Class A mortgage rate is offered at 6.00%, one listed rate fortrading will be 5.00% and another will be 7.00%. Additional or lesscoupons may be added for market conditions. As those skilled in the artwill realize, additional order type information pertaining to differenttype orders such as limit orders, stop orders, market orders, and FAKorders may also be provided.

A match client 206 may contain application program interfaces and/orother software modules that allow front end clearing application 202 tocommunicate with a plurality of match servers 208 a and 208 b. A varietyof different match clients may be used to allow different front endclearing applications to communicate with match servers. For example, afirst front end clearing application may use a first match client tocommunicate with a set of match servers and a second front end clearingapplication may use a second match client to communicate with the sameset of match servers. Front end clearing application 202 is also coupledto an all trades database 210. All trades database 210 contains a masterrecord of all trades that have taken place.

The embodiment shown in FIG. 2 includes two match servers 208 a and 208b. Servers 208 a and 208 b may be in the same location or may begeographically distributed. Two servers are shown for illustrationpurposes only and with the understanding that aspects of the inventionmay use more or fewer servers. Match servers 208 a and 208 b may each beconnected to one another, connected through a common hub or connected inanother manner that allows each match server to communicate with theremaining match servers. Servers 208 a and 208 b contain modules formatching orders, such as futures orders executed at an exchange. Server208 a includes a match module 212 a that may be implemented with asoftware application that matches unmatched trades. Match module 212 amay include or be linked to a set of rules for matching orders. Therules for matching orders may identify specific match criteria used formatching specific orders. As described in detail below, a match modulemay use several different match criteria and the match criteria selectedmay be a function of the length of time that order data has remainedunmatched.

Server 208 b may include match modules 212 b which may be similar tomatch module 212 a. In one embodiment of the invention, match modulesmay be used to match specific types of orders or trades that take placein specific locations. For example, match module 212 a may be configuredto match orders that were executed at one exchange and match module 212b may be used to match orders that were executed at another exchange.

Trade data is initially received from front end clearing application 202and stored in caches 214 a and 214 b. In one embodiment of theinvention, each cache contains all trade data. In another embodiment ofthe invention, trade data is distributed among caches 214 a and 214 b.

In one embodiment of the invention, match modules 212 a and 212 b and/orcaches 214 a and 214 b communicate using the Java Messaging Servicestandard publish and subscribe application program interface (API). Thetype of information that may be exchanged includes information to add,update and remove trade and/or order data from caches 214 a and 214 b.In one implementation, only information identifying changes in the stateof caches 214 a and 214 b is exchanged, as opposed to informationidentifying the entire state of a cache.

Servers 208 a and 208 b may also include aging queues 216 a and 216 b.Each aging queue may contain trade data that has not been matched. Eachaging queue may contain a unique subset of unmatched trade data so thatthe workload is distributed across servers.

FIG. 3 illustrates a method of matching orders in accordance with anembodiment of the invention. In step 302 order data is received at amatch server. Order data may include information that identifies aparticular class, price and quantity for a MBS TBA future. In step 304,an attempt may be made to match the received order data with otherexisting orders. Step 304 may be performed at a match module, such asmatch module 212 a and may include attempting to match the order data toexisting but opposite orders.

Next, in step 306 it is determined whether the order data was matched.When the order data is matched, the process proceeds to step 318, whichis described below. When the trade data has not been matched, in step308 the order data is stored in an aging queue. The order data is storedin the aging queue for a predetermined period of time in step 310.

In step 316, it is again determined whether the order data was matched.When the order data has been matched, the match server may transmitstate change information to other match servers in step 318. Step 318allows other match servers to stop any attempts to match the order datathat has been matched.

In an aspect of the invention, MBS TBA future contracts may consist of aseries of monthly expirations based upon Ginnie Mae and GSE (Fannie Maeand Freddie Mac) Mortgage Backed Securities which already trade in theTBA over-the-counter market. Trading may occur on MBS TBA futurecontracts until a predetermined time period before the settlement date,during which trading may no longer occur. For example, trading may ceaseon TBA futures on fifth business day before the settlement date for aClass A 30-year MBS as identified in the schedule posted by the MortgageBacked Securities Clearing Corporation division of the Fixed IncomeClearing Corporation.

In an alternative embodiment, trading may cease on MBS TBA futurecontracts one week or seven days before the monthly settlementdetermined by the Bond Market association as this is the traditionalsettlement day for options on mortgage-backed securities. For example,if July 13^(th) were the MBS TBA settlement date then trading may ceaseon July 6^(th).

In an aspect of the invention, MBS TBA futures contracts may be clearedand settled through a central counterparty clearing firm. The centralcounterparty clearing firm may utilize clearing module 180 andpost-trade processing module 182. The MBS TBA futures contracts may beguaranteed by the central counterparty clearing firm. The centralcounterparty clearing firm may at any time upon notification ofliquidation of MBS TBA future contracts clear any outstanding long andshort positions. The MBS TBA future contracts may be mark-to-market forclearing purposes.

If the central counterparty clearing firm is notified that positionswill be settled with a delivery of the MBS, then after the expirationtime, the long and short positions may be netted and clearing firms foreach open position identified. Each party having an open position in theMBS TBA future may receive delivery instructions. The deliveryinstructions may indicate the party's position, the issuer of the MBS(e.g., FNMA, Freddie Mac), coupon, contract settlement price, and anidentified counterparty clearing firm. The parties thus receivenotification of their delivery obligations. A delivery confirmation maybe sent to the central counterparty clearing firm confirming that theTBA trades conforming to the delivery instructions have been executed.

In an aspect of the invention, the central counterparty clearing firmmay require that clearing firms that want to trade MBS TBA futures havein place a relationship with an MBSCC member to effect delivery. Thecentral counterparty clearing firm may generate a list of clearing firmswhich are also members of the MBSCC. After MBS TBA future contractlaunch, the central counterparty clearing firm may generate anexceptions report indicating clearing firms holding open interests whichare not MBSCC members.

In an aspect of the invention, a determinable number of days prior tocontract expiration/delivery, clearing firms appearing on the exceptionsreport are informed that they must either liquidate their positions orprovide the central counterparty clearing firm with a clearing firm thatis a member of the MBSCC. For example, clearing firm X may be long 100TBA futures two days prior to delivery and appears on the centralcounterparty clearing exceptions list. Firm X will have to eitherliquidate their position or inform the central counterparty clearingfirm which MBSCC clearing firm has been designated to book the 100 lotTBA buy order on its behalf. In an embodiment, firm X may inform thecentral counterparty clearing firm that firm Z has been chosen as theirclearing firm. On contract settlement day, the central counterpartyclearing firm matches and clears outstanding long and short positions.The central counterparty clearing firm may generate a delivery report onbehalf of firm X enumerating the details of the forward TBA trade thatwill fulfill their delivery obligation, e.g. counterparty, trade price,size, coupon, etc. . . . The central counterparty clearing firm maynotify firm Y that firm Y is 100 futures short and furthermore thattheir counterparty is MBSCC member firm Z who books the order on behalfof firm X.

In an aspect of the invention, the central counterparty clearing firmmay establish a subset of clearing firms which may be used to book TBAtrades based on open TBA future positions. In an embodiment, the subsetof clearing firms may include two firms so that all market participantsunderstand that in order to fulfill their contract delivery obligations;they will have to have a TBA trading relationship with one of thecentral counterparty clearing designated firms.

FIG. 4 shows an exemplary method for clearing and settling openpositions for TBA futures according to one aspect of the invention. Instep 402, open positions may be determined in a TBA future market priorto expiration of a TBA future. In step 404, notification of liquidationof TBA future contracts may be received at a central counterparty. Next,in step 406 netting of outstanding long and short positions may beexecuted at the central counterparty. The netting may comprisemark-to-market the outstanding long and short positions for clearingpurposes.

In step 408, a clearing firm for each open position to be settled bydelivery may be determined. The clearing firm may be chosen from a listgenerated and maintained by the central counterparty clearing firm. Thechosen clearing firm may be a member of the MBSCC. Next, in step 410 thecentral counterparty may generate delivery instructions. The deliveryinstructions may comprise information such as position information,identity of an issuer of an MBS, coupon rate, contract settlement price,and an identified counterparty. Finally in step 412, the clearing firmmay be notified of the delivery instructions.

Various embodiments have been described and illustrated. However, thedescription and illustrations are by way of example only. Many moreembodiments and implementations are possible within the scope of thisinvention and will be apparent to those of ordinary skill in the art.

It is intended in the appended claims to cover all such changes andmodifications which fall within the true spirit and scope of theinvention. Therefore, the invention is not limited to the specificdetails, representative embodiments, and illustrated examples in thisdescription. Accordingly, the invention is not to be restricted exceptin light as necessitated by the accompanying claims and theirequivalents.

We claim:
 1. A system for settling to-be-announced (TBA) futurescontracts comprising: a processor; and a non-transitorycomputer-readable medium containing computer-executable instructionsthat, when executed by the processor, cause the system to perform stepscomprising: (a) determining open positions in a TBA futures market priorto expiration of a TBA future, (b) netting outstanding long and shortpositions in response to notification of liquidation of at least aportion of the TBA futures contracts prior to expiration of the TBAfuture, (c) identifying a counterparty for each of at least a portion ofthe open positions, (d) confirming the open positions to each identifiedcounterparty, and (e) generating delivery instructions for the openpositions.
 2. The system for settling TBA futures of claim 1 wherein theTBA futures comprise mortgage backed security (MBS) TBA futures.
 3. Thesystem for settling TBA futures of claim 1 wherein the computer-readablemedium contains computer-executable instructions that, when executed bythe processor, cause the system to further perform marking-to-market ofthe TBA futures contracts.
 4. The system for settling TBA futures ofclaim 1 wherein (a) is performed at a clearing firm that is a member ofa mortgage backed security clearing corporation (MBSCC) or has arelationship with an MBSCC member firm.
 5. The system for settling TBAfutures of claim 1 wherein the delivery instructions include details ofa forward TBA trade to fulfill delivery obligations.
 6. The system forsettling TBA futures of claim 1 wherein (a) is performed at a clearingfirm that comprises a central counterparty clearing firm.
 7. The systemfor settling TBA futures of claim 6 wherein the clearing firm isapproved by the central counterparty.
 8. The system for settling TBAfutures of claim 6 wherein the central counterparty designates at leasttwo clearing firms through which deliveries are made.
 9. The system forsettling TBA futures of claim 1 wherein the computer-readable mediumcontains computer-executable instructions that, when executed by theprocessor, cause the system to further perform: (f) identifying that atleast one of the open positions is associated with a clearing firm thatis not a member of the MBSCC; and (g) requesting that the clearing firmthat is not a member of the MBSCC either liquidate the open positionassociated with the unapproved clearing firm or select a designatedclearing firm.
 10. A non-transitory computer-readable storage mediumhaving computer-executable program instructions stored thereon that whenexecuted by a processor cause the processor to perform steps forsettling to-be-announced (TBA) futures contracts, the steps comprising:(a) determining open positions in a TBA futures market prior toexpiration of a TBA future, (b) netting outstanding long and shortpositions in response to notification of liquidation of at least aportion of the TBA futures contracts prior to expiration of the TBAfuture, (c) identifying a counterparty for each of at least a portion ofthe open positions, (d) confirming the open positions to each identifiedcounterparty, and (e) generating delivery instructions for the openpositions.
 11. The computer-readable storage medium of claim 10 whereinthe TBA futures comprise mortgage backed security (MBS) TBA futures. 12.The computer-readable storage medium of claim 10 havingcomputer-executable program instructions stored thereon that, whenexecuted by the processor, cause the processor to further performmarking-to-market the TBA futures contracts.
 13. The computer-readablestorage medium of claim 10 wherein the clearing firm is a member of amortgage backed security clearing corporation (MBSCC) or has arelationship with an MBSCC member firm.
 14. The computer-readablestorage medium of claim 10 wherein the delivery instructions includedetails of a forward TBA trade to fulfill delivery obligations.
 15. Thecomputer-readable storage medium of claim 10 wherein (a) is performed ata the clearing firm comprises a central counterparty clearing firm. 16.The computer-readable storage medium of claim 15 wherein the clearingfirm is approved by the central counterparty.
 17. The computer-readablestorage medium of claim 15 wherein the central counterparty designatesat least two clearing firms through which deliveries are made.
 18. Thecomputer-readable storage medium of claim 10 having computer-executableprogram instructions stored thereon that, when executed by theprocessor, cause the processor to further perform: (f) identifying thatat least one of the open positions is associated with a clearing firmthat is not a member of the MBSCC; and (g) requesting that the clearingfirm that is not a member of the MBSCC either liquidate the openposition associated with the clearing firm that is not a member of theMBSCC or select a designated clearing firm.
 19. A computer-implementedmethod for settling to-be-announced (TBA) futures contracts comprising:(a) determining at a processor open positions in a TBA futures marketprior to expiration of a TBA future, (b) netting at a processoroutstanding long and short positions in response to notification ofliquidation of at least a portion of the TBA futures contracts prior toexpiration of the TBA future, (c) identifying a counterparty for each ofat least a portion of the open positions, (d) confirming the openpositions to each identified counterparty, and (e) generating deliveryinstructions for the open positions.
 20. The computer-implemented methodof claim 19 further comprising: (f) identifying that at least one of theopen positions is associated with a clearing firm that is not a memberof the MBSCC; and (g) requesting that the clearing firm that is not amember of the MBSCC either liquidate the open position associated withthe clearing firm that is not a member of the MBSCC or select adesignated clearing firm.